Canadian Dollar to Strengthen on Recovery in Crude Price

There is a substantial decrease in the price of crude oil, and it has a terrible impact on the Canadian Dollar over the past two weeks. On the contrary, there are increased demands for safe-haven currencies like for instance Yen because of the Republicans failed to repeal Obamacare and political uncertainty in Europe. The currency pair CAD/JPY moved from a high figure of 85.26 to 82.22 in a time span of 14 days. There are possibilities of a bullish reversal in the CAD/JPY pair, and we have enumerated reasons below.

There is an increase of 0.4% in the core consumer prices in Canada on month on month basis in February. The data is provided by Statistics Canada, and the figure beats the estimates made by analysts with a consumer price increase of just 0.1%.

The reading of Consumer Price Index (CPI) in the last month increased 0.5%. It is to be noted that one week earlier, there were reports of 1.7% month on month increase in retail sales by Statistics Canada in January. The increase was more than the expectation of the market by 1.3% growth and better than previous month downwardly revised 0.5% decline.

In Japan, there is 0.1% year-on-year increase in the February retail sales compared with 1% growth in the last month. According to analysts, they have anticipated a rise of 0.5% in retail sales. Since October 2016, it is the weakest increase. On a month to month basis, there is 0.2% growth in retail sales instead of 0.5% in earlier months. The consumer confidence index increased in the US to a 16-year high figure of 125.6 in March from February’s number of 116.1. This would undoubtedly weaken the Yen currency and strengthen Greenback. As a result of this, a rally in the currency pair CAD/JPY can be expected.

The currency pair of CAD/JPY seems to have found support at 82.40. The momentum indicator shows a positive divergence in the price and supports the argument. Hence, an extended position in the counter is likely to have a minimum risk.

CADJPY Pair March 30th, 2017

As a currency trader, you can open a LONG position near 83 and put a stop order below 82. You can sell the “Long” position near 84.40.

You can purchase a call option, and it will create a replica of the currency market. We would advise you to trade near 83 on the OTC market and the expiry period date should be somewhere around 8th April.

Steven Rudford

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